MPs who retire or lose their seats in elections will no longer receive “golden
goodbye” payments of up to £33,000, under reforms to be proposed this week.

The “excessively generous” pension arrangements that MPs enjoy must also be cut, Sir Ian Kennedy, the chairman of the parliamentary pay body, will recommend.

Sir Ian said that his reforms, which are expected to see the pay of MPs rise by £10,000, will make the system “fair” and end the “cushioned world of privilege” that parliamentarians have enjoyed.

The Independent Parliamentary Standards Authority, which Sir Ian chairs, will publish its recommendations on Thursday in the latest effort to restore public faith in MPs’ pay after the expenses scandal of 2009, which The Telegraph exposed.

Sir Ian insisted on Sunday that there had never been an easy solution to what MPs should be paid, pointing out that representatives used to be remunerated with parcels of fish.

He said MPs do “a responsible and important job, which should be recognised” and they should be treated “in a professional and modern way”.

Writing in The Sunday Times, Sir Ian called for an end to the “nod and wink” school of public financing.

“Given what has happened elsewhere in the public sector, MPs' excessively generous pension arrangements seem out of place,” he said.

“Similarly, resettlement allowances, which until recently were worth up to one year's salary to compensate an MP who lost his or her seat or who decided to stand down from parliament, are a reminder of the old, cushioned world of privilege and make no sense to the general public.

“The very notion that we have to ‘resettle’ former MPs is odd. These payouts are a historic peculiarity.”

Resettlement allowances cost taxpayers about £7 million in 2010, when more than 200 MPs lost their seats or retired from the Commons.

Sir Ian’s recommendation to reduce the benefits that MPs receive is intended to calm any backlash against plans to raise their basic salary, which is expected to increase from £66,396 to almost £80,000 after 2015.

The cut in perks is also intended to ensure that the overall cost of politics is reduced.

David Cameron warned last week that taxpayers would not accept an increase in the bill for Westminster politics.

Nick Clegg has already said that he is opposed to a large increase in MPs’ pay and Tim Loughton, a senior Tory and former minister, has promised he will not accept such a rise in his own salary.